More competition believed possible

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by Chris Tobin

The Commerce Commission believes cheaper petrol prices for consumers are achievable.

In a recent market study into the retail fuel sector, the commission said an active wholesale market did not exist in New Zealand and had not existed since deregulation 30 years ago.

The country’s fuel industry was essentially a vertically integrated oligopoly, the commission said.

“The three majors (Z Energy, BP and Mobil] benefit from the cost efficiencies of their infrastructure-sharing arrangements.

“They supply more than 90% of the retail fuel sold through a network of retail sites they own and operate, dealer-owned retail sites that carry their brands, and distributors which in turn supply their own dealers and/or retail sites that they own and operate.”

The commission said competition in the wholesale fuel market was not delivering the benefits for New Zealand consumers that it could.

“Under current practices, New Zealand consumers appear likely to continue paying more for fuel than we would expect if a workably competitive wholesale market existed.”

The commission considered Timaru Oil Service’s new terminal to be potentially a positive move and recommended the introduction of a terminal gate pricing (TGP) regime.

“A TGP is a spot price at which wholesale suppliers will sell fuel to wholesale customers at storage terminals.

“We recommend this regime is based on the Australian equivalent, with some adaptation for New Zealand market conditions.”